THE Government has rejected a generous ESB severance deal to slash staff numbers by 700.

It has refused to sanction an exit package previously offered at the state-owned energy supplier over the decades when it sought voluntary redundancies.

Sources said the Department of Communications, Energy and Natural Resources would not approve the existing exit deal, which was tabled during talks between management and unions.

They said the department fears a public storm if the attractive deal is offered as the economic crisis continues, and as consumers face soaring electricity prices.

The existing generous severance deal means workers can get half pay for up to 12 years before retirement, a lump sum worth a year's salary, and extra years of service that they have not actually worked.

At 60, they get a pension based on service to this age.

However, it is likely that the new scheme will not include all or part of the extra years of service, while the half pay element is likely to be based on a less attractive formula.

An almost identical deal was recently offered to staff at Bord Gais, although that scheme is unlikely to be as expensive as the company only wants to shed 80 workers.

Staff were invited to apply for voluntary redundancy and early retirement packages worth more than €440,000 each.

Pension

The half salary element, worth more than €300,000, is funded by Bord Gais, while it continues to pay pension contributions, and workers are also free to apply for other jobs. They could draw a pension at 60, based on service to 65, or five extra years.

Sources said the Department of Communications, Energy and Natural Resources said a "watered-down" version is likely to be offered after the deal goes back to the negotiating table. But this will make it far more difficult for the ESB to achieve its 1,000 staff cut target over four years.

The ESB employs more than 7,000 workers. Average pay at the semi-sate company is €75,500 -- which rises to €94,300 when pension contributions are included.

It wants to shed 700 staff through the severance scheme and the rest through normal retirements by 2015 -- with up to 250 of these coming from its power generation companies.

Talks have been under way for weeks between unions and management to reach a deal to cut payroll costs by a fifth -- or €140m. The ESB aims to conclude discussions by the end of next month.

It is understood that the commercial semi-state wants the voluntary scheme to make up the bulk of the savings, but is also considering a shorter working week. Unions have refused to negotiate pay cuts.

An independent report by consultants Grant Thornton found there were several hundred surplus positions at the ESB.

The ESB has used the severance package in the past to cut staff numbers, which have dropped from a high of around 14,000 over 10 years ago to around 7,000 now.